RBI dividend to government halves to $4.78 billion

Andrew Cummings
August 12, 2017

The RBI Act stipulates that after making provisions for contingencies and corpus funds as defined therein, the balance profit of the apex bank is to be transferred to the central government. RBI had in 2014-15 paid Rs. 65,896 crore dividend and Rs. 52,679 crore in the year prior to that. This was just Rs 20 crore less than the year ago's dividend transfer of Rs 65,896 crore.

This year's dividend amount is the lowest since 2011-12.

The shortfall in dividend from the RBI will likely spur the government to increase revenue from other areas, analysts added, including potentially cutting spending or seeking to raise more from planned market divestments in state-run companies.

The Central Government, last year, in a bid to defunct illegal money, scrapped high currency notes, belonging to denomination of Rs 500 and Rs 1000, which paved the way for potential surplus transfer from the RBI due to demonetisation.

Given RBI's figures, it has become evident that other public banks will fare worse, thus giving rise to the grim prediction that fiscal deficit might increase from 3.2 per cent to 3.4 per cent this year.

The government on November 8 previous year demonetised old Rs 500 and Rs 1,000 currency notes as part of efforts to fight corruption and the black money menace. The RBI did not provide a breakdown of its dividend. "If other conditions remain unchanged, the fiscal deficit can increase to 3.4 per cent from 3.2 per cent a year ago", says Madan Sabnavis, Chief Economist at CARE Ratings (India).

The apex bank is expected to publish its annual reports next week.

Under attack from Congress for discrepancies in printing of currency notes post demonetisation, the RBI on Friday said it is following the best global practice and quality of notes are within "tolerance parameters".

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